From December 1999 through December 2009, while Vanguard 500 Index (VFINX) lost a total of 9.8%, Vanguard Total InternationalStock Index (VGTSX) gained 25.3%, and VanguardEmerging Markets Stock Index (VEIEX) was up 155.3%! How can we not consider investing overseas?

For decades, the US economy was the engine of growth worldwide. US consumers not only placed great demand on our own goods and services, but also on those of foreign companies.

Yet, as trade barriers have fallen, the rise of a new middle class, with growing incomes and growing appetites for all manner of products, has led to a sharp rise in domestic demand in countries like the BRICs—Brazil, Russia, India, and China—not to mention many still-emerging economies.

Much of the world's economic growth already occurs outside of the United States. The International Monetary Fund (IMF) forecast released in July suggests that while the US will grow 3.3% for all of 2010 and Europe will grow by just 1.0%, developing Asian nations will growth by 9.2%, with China and India expected to see growth at 10.5% and 9.4%, respectively.

This more rapid growth means that faster-growing economies are grabbing a larger share of world production. If you have a US-only portfolio, you are limiting yourself to investments in companies that produce slightly more than one-quarter of the world's economic output. Moreover, the US share of global economic growth is expected to continue to decline.

I believe investors with a long-term growth perspective are best served by investing anywhere from 20% to 40% of their portfolio in foreign stocks. For investors with more conservative goals combining growth and income, I often recommend a commitment of just 10% or so of a portfolio in foreign stocks.

Vanguard FTSE All-World ex-US SmallCap Index (VFSVX) holds over 2,500 stocks, with more than half its assets in companies in Canada, the UK, Japan, Taiwan, and Australia. As is true in the US, smaller companies can be faster growers and hence are a good component in a growth-oriented portfolio.

I always considered Vanguard International Growth’s (VWIGX) former lead manager Richard Foulkes one of the best of the breed among international investors. Since he retired almost five years ago, Virginie Maisonneuve has taken over Foulkes's approximately 45% portion of this $15-billion portfolio.

The fund has three managers, with Baillie Gifford handling another 45% of assets and M&G Investment Management handling about 10% or so. What's encouraging about this trio is that the portfolio hasn't exploded to hold hundreds of stocks—it currently has about 180 or so, and the top ten represent about 17% of assets. With growth stocks presenting some decent opportunities, this fund is a good option as a core foreign holding, particularly given its almost 25% stake in emerging markets.